In June 2025, FinCEN released a critical advisory updating U.S. financial institutions on the evolving tactics Iran employs to evade sanctions, with a particular emphasis on trade finance and commodities trading.
This advisory, aligned with the U.S. government’s National Security Presidential Memorandum (NSPM-2) maximum pressure campaign, highlights how Iran’s complex illicit networks continue to exploit global trade and financial systems—especially in oil exports and shadow banking—to fund weapons programmes and regional proxies.
Deep Blue Intelligence (DBI), a joint program run with Pole Star Global’s key partner, Blackstone Compliance Services, proactively trained clients on red flags and Iranian sanctions evasion tactics before the advisory was released. This training also included key information which was not contained in FinCEN’s advisory.
This training was part of DBI’s “Tools, Targeting, and Training” approach. Not only do DBI clients have access to our advanced training by sanctions experts, but DBI protects its clients by identifying 96% of relevant vessels sanctioned by OFAC prior to their designation, often over a year in advance. Furthermore, both Pole Star Global and Blackstone Compliance Services continue to support banks in building transaction monitoring scenarios for typologies highlighted in the advisory, including the use of Hong Kong Non-Resident Accounts.
Why This Matters for Trade Finance
Trade finance professionals and commodities traders play a pivotal role in scrutinising transactions tied to international trade flows, especially commodity exports like oil, which remain Iran’s primary revenue source despite stringent sanctions. Understanding the red flags and methods described by FinCEN is essential to identify suspicious activities and uphold compliance with anti-money laundering (AML) and counter-terrorist financing (CTF) obligations. These red flags are also broadly applicable to all maritime companies seeking to remain compliant with sanctions regulations.
Context: NSPM-2 and the New Sanctions Landscape
In February 2025, the National Security Presidential Memorandum (NSPM-2) launched a “maximum pressure” strategy targeting Iran’s nuclear ambitions, weapons development, and support for terrorist proxies. This directive has led to enhanced sanctions focused on:
- Iranian oil smuggling networks funding the IRGC and militant groups;
- Shadow banking operations facilitating illicit financial flows;
- Weapons procurement activities that bolster Iran’s ballistic missile and Unmanned Aerial Vehicle (UAV) programmes.
The 6 June sanctions action—coinciding with the advisory—marked the first targeting of an Iranian shadow banking network under NSPM-2, underscoring increased enforcement intensity.
Iranian Oil Smuggling and the Shadow Fleet: Key Red Flags
Despite sanctions, Iran continues to generate billions through oil sales, often smuggled via a “shadow fleet” of ageing vessels that obscure ownership and origin through:
- Frequent vessel renaming, reflagging, and falsified documentation
- Disabling of AIS tracking and ship-to-ship transfers
- Mislabeling oil cargo as blends from other countries
Over a third of all sanctions under the Trump administration have targeted Iranian shipping, Since 2018, the U.S. Treasury and State Department have blocked over 350 vessels involved in transporting Iranian oil.
How Can You Identify Vessels Involved in Iranian Oil Smuggling and the Shadow Fleet?
FinCEN details key red flags to help financial institutions detect and report suspicious activity related to illicit Iranian financial activities related to Iranian oil smuggling and the shadow fleet.
Key red flags identified to detect such activity are detailed below:
- Shipping documents inconsistent with maritime database information (e.g., vessel calls to Iranian ports not reflected in documents)
- Vessels involved in transactions with suspicious histories such as:
- Recent or multiple name or flag changes
- Ownership or operator changes post-OFAC designation, but previous, now designated owners/operators are still involved
- Vessels claiming IMO numbers that belong to other vessels or scrapped ships
- Recent or multiple name or flag changes
- References to “Malaysian blend” oil shipments bound for China via Southeast Asia, combined with vessel AIS irregularities or ship-to-ship transfers in the region
- Transactions showing that petroleum/shipping companies deal with counterparties or vessels linked to Iran or making stops at Iranian ports
- Transactions involving vessels previously linked to suspicious activities, or documents that are falsified, lack consignees, or omit key information to hide Iranian ties
Shadow Banking Networks: The Hidden Finance Web
Iran’s shadow banking operations rely heavily on front companies* and exchange houses*—especially in Hong Kong, the UAE, and free trade zones—that facilitate access to global financial systems. These entities:
- Launder oil revenues and funnel funds to Iranian military bodies such as MODAFL and the IRGC-Qods Force
- Open foreign accounts using falsified documents and complex transaction layering
- Exploit correspondent banking relationships to move funds into U.S. dollars and evade sanctions
*Exchange houses: Exchange houses of Iran manage a network of front and trading companies abroad to launder oil revenue, which is then used to procure weapon components and other materials from the international market. By using front company accounts outside Iran to complete transactions, sanctioned Iranian entities are able to conduct transactions through the international financial system without repatriating funds to Iran.
*Front companies: Front companies are entities that mask the true ownership and control of sanctioned parties to facilitate illicit financial flows.
How can you identify Iranian shadow banking networks?
Key red flags include:
- Transactions routed through multiple exchange houses or trading companies with increasing fees and complex patterns inconsistent with normal commercial practice
- Use of forged or falsified documents by exchange houses or trading companies near Iran to conceal parties’ identities and access U.S. dollars via correspondent banking with U.S. institutions
- Customers receiving wire transfers or deposits lacking, or having incomplete, source information—especially from high financial risk locations linked to Iranian illicit finance
- A UAE free trade zone trading company with unclear ownership, partnering mainly with Singapore and Hong Kong companies, and holding accounts at multiple UAE banks
- A Hong Kong company using a Chinese non-resident account, with little online presence or one that has been recently set up, sending large unexplained payments—many to UAE trading firms without clear business reasons
Iran uses oil money from illicit trade to procure weapons components, dual-use goods, and chemicals from the international market, for ballistic missiles and to implement a structured plan for deploying and managing Unmanned Aircraft Systems (UAS). In this effort, Iran has increased both armed and unarmed Unmanned Aerial Vehicles (UAVs), which have been sold to the Houthis over the past 10 years, and subsequently to Russia.
How can you identify Iranian weapons procurement networks?
Key red flags include:
- Transactions involving general trading or suspected front companies linked to Iran, often with unclear ownership, unusual directors, or residential/shared business addresses
- Customers providing business information inconsistent with transaction history, especially if they have a record of shipments to or from Iran and trade mainly with tech or chemical suppliers
- Customers sending money to companies in unrelated industries, mismatching their onboarding information (e.g., receiving funds from commodity traders but paying electronics suppliers)
- Multiple newly created companies sharing owners, addresses, or partners, having similar names and transaction patterns, little online presence, but conducting large, recurring transactions
- Middle Eastern companies linked to Iran or suspected as fronts receiving payments mainly from petroleum firms and sending payments mostly to electronics companies in Hong Kong and China
Proactive Compliance with Pole Star Global and Blackstone Compliance Services: Remain One Step Ahead of Sanctions
Pole Star Global’s key partner, Blackstone Compliance Services, and its Deep Blue Intelligence customers were provided training on all of these red flags prior to the advisory and have deep insights into exactly how Iran moves its money and cargo.
Notably, a few items were omitted from the advisory that Pole Star Global and Blackstone Compliance Services have worked to address, such as how key Iranian networks use structured cheque deposits to rapidly move funds through front companies. We continue to cover around 96% of in-scope vessels on DBI prior to their designation on IFSC.
Pole Star Global and Blackstone Compliance Services have also helped banks develop specific transaction monitoring scenarios for many of the typologies cited in the advisory, such as the use of non-resident bank accounts (NRA accounts).
Speak with our experts on how to apply FinCEN’s red flags in your risk monitoring process.
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